Defining goods was not the order of the day earlier in the Tariffs of Central Excise and Customs. There were far too many controversies at that time regarding the identity of goods for classification. Rubber, resin, cotton fabrics, steel bars, rods, grease proof paper and various such items generated court cases.
It was realized that defining goods (and even artificially) would solve problems. It did. But now the trend has become too often to give artificial definition by incorporating deeming clause through the word ‘includes’. The concept of ‘manufacture’ which is fundamental in central excise is inclusive. Section 2(f) of the Excise Act says manufacture includes any process, – (i), (ii), (iii). In Chapter 39 for plastics in the sub-heading note-2 plasticiser includes secondary plasticiser. There are umpteen such inclusive definitions in excise.
But the service tax tariff takes the cake for incorporating inclusive definitions. The definition of fashion designing is hundred per cent inclusive. Management consultant and management maintenance or repair have inclusive definitions. Similarly other inclusive definitions are event management, information technology software, pandal or shamiana contractors, photography and many more. This shows that there is a lot of difficulty in defining these terms.
While this difficulty is understandable, what is not permissible is to expand the inclusive definition far away from the nexus to the main concept. By nature inclusive definition gives an extended or expansive meaning to the definition. The Supreme Court has observed1 that the word “includes” is usually used in the interpretation clause in order to enlarge the meaning of the words in the Statute. At the same time the Supreme Court in this judgement has taken great care to prove that what has been included has an indirect nexus with the main heading. So the Supreme Court has not allowed an unlimited expansion of the expression “includes”.
There are other judgements of Supreme Court which support the proposition that an inclusive definition which gives an extended meaning cannot be extended far too much. In another case2 the Supreme Court, while interpreting the inclusive definition, in clause (d) of sub-section 4 of section (4) of the Excise Act has pointed out that the extended meaning of value has been made to include the cost of packing but “plainly the extension must be strictly construed, for what is being included in value now is something beyond the value of the manufactured commodity itself”.
Similarly, in a later judgement the Supreme Court has supported the principle that inclusive definition should not expand more than that the context indicates. In fact, whenever a normal expansion has been allowed to a meaning like in the case of issuing demand beyond the normal period of time, such expansion has been allowed by the Supreme Court only if there is some positive ground such as fraud or misdeclaration and not merely for non-compliance of certain provisions. This means that an extended meaning of a definition should be strictly interpreted.
The conclusion is the following:
(i) While inclusive definition which gives an extended meaning does solve some problems of defining goods and services, there should not be too much of expansion of meaning to such an extent that the nexus of the included goods with the main heading is lost.
(ii) The inclusive portion of the definition should be specific and enumerative and it should not by itself be very generally worded.
(iii) It must be remembered that extended meaning of a definition is to be strictly interpreted.
(v) We would not need definitions if we have comprehensive goods tax and a comprehensive service tax with a negative list of those which are not taxable.
